Argentina and Uruguay

Grinding small

A decade of bad relations?

A MONTH after it opened, the cellulose mill built in Fray Bentos by Metsa-Botnia, a Finnish company, at a cost of $1.2 billion, already makes an impact on the senses. A conveyor-belt takes wood chips up a soaring outdoor ramp into silos where they are pulped and shipped down the Uruguay river, which forms the country's border with Argentina. The process generates a steady whirring sound, a plume of steam from a 120 metre (400 feet) chimney and—only for the first few weeks, the firm insists—a smell strongly reminiscent of boiled cauliflower.

The plant is the biggest single investment in Uruguay's history. It symbolises a long-awaited economic renewal. But for a group of protesters across the river in Argentina, it is a polluting behemoth that will destroy their crops and turn tourists away. They have blocked the international bridge near the factory for most of the past two years. Argentina's government supports them, and the dispute has brought relations between the two countries—whose culture and economies have been inseparable since their founding—to their coolest point in 50 years.

Although construction of the plant was finished by October, Tabaré Vázquez, Uruguay's president, agreed to delay its opening until the Ibero-American summit in early November in the hopes of reaching a deal. But no progress was made at the summit, and a frustrated Mr Vázquez authorised Botnia to begin operating without informing his Argentine counterpart, Néstor Kirchner. When Mr Kirchner found out the next day, he told Mr Vázquez that he had “stabbed the Argentine people in the back”. An Argentine official said that repairing the damage would take “a decade”.

The dispute will be the first foreign-policy test for Cristina Fernández de Kirchner, the president's wife, who succeeds him on December 10th. Ms Fernández has promised to improve relations with fellow members of Mercosur, a South American trade block to which Uruguay belongs, which have been strained.

But she also backs Argentina's claim at the International Court of Justice that Uruguay did not consult Argentina, as it was legally obliged to, before approving the mill. Even if the tribunal rules in favour of Argentina it is highly unlikely to order a drastic remedy, such as moving the plant. The protesters vow to remain on the bridge until Botnia leaves Fray Bentos. Some officials have suggested that Argentina might impose capital controls or trade sanctions on Uruguay, whose small economy is closely linked to its neighbour's. Doing so would make Argentina look like a bully, and might even drive Uruguay out of Mercosur, annoying Brazil, whose government Ms Fernández is courting. The protests have already cost Uruguay $500m, according to its government.

The outcome may depend on the plant's environmental impact. Uruguay's left-of-centre government says it will close the mill if, as protesters fear, it causes acid rain or poisons the river. By contrast, if the factory is as clean as Botnia claims, it will be easier for Ms Fernández to withdraw support for the demonstrators.

Yet even if the governments make it up, restoring friendship across the river will be hard. “There's a lot of sadness and anger,” says Nelson Fernández, a television news director in Montevideo. “The wounds will last for a very long time.”